DeFi Resilient Enough to Survive Black Swan Events: Hashkey Report

According to Hashkey Capital’s end-of-year report, decentralized finance (DeFi) has the potential to be “several times more scalable than the existing financial industry.” DeFi protocols are resilient and are likely to survive black swan events like the Terra Luna/UST collapse in addition to their scaling potential, the paper suggested.

Hashkey Capital, an end-to-end financial services company for digital assets, stated that unfavorable market conditions that mostly prevailed in 2022 had contributed to the reduction in the value of total assets under management in the research titled “DeFi Ecosystem Landscape Report.” The report detailed:

“The decline of the TVL – Total Value Locked (a proxy for total assets under management in DeFi) – was also motivated by the general market conditions. Lower crypto prices (due to generally unfavorable macro) mean that the value of the collaterals provided in DeFi lending is also lower, reducing the motivation to get a loan against those collaterals. DEX [decentralized exchange] activity and crypto trading volumes are also lower.”

DeFi Adoption Rate Plummets in 2022: Hashkey Report

The report’s data indicates that the TVL, which peaked at $180 billion in December 2021, fell from just under $150 billion around May 2022 to just over $50 billion in late October. Despite this TVL reduction, the research claims that some DeFi market segments continue to “show a very optimistic trend.”

According to the analysis, there has been a massive decline in the growth rate of adoption in 2022 (31%) as compared to 2021 (545%). The research made the following observations regarding this result as well as the increase in wallets to over 5 million:

“2022 can be seen as a year of consolidation where most projects are busy building and improving their products rather than spending their resources on marketing activities. 2022 is also the year when the UI and user experience of DeFi protocols improved significantly, to a level that we can finally say that it’s easier to use some DeFi protocols than using a home banking app.”